SBI Cards and Payment Services Ltd
NSE:SBICARD
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Intrinsic Value
The intrinsic value of one SBICARD stock under the Base Case scenario is 1 232.29 INR. Compared to the current market price of 679.7 INR, SBI Cards and Payment Services Ltd is Undervalued by 45%.
The Intrinsic Value is calculated as the average of DCF and Relative values:
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SBI Cards and Payment Services Ltd
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Fundamental Analysis
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SBI Cards and Payment Services Ltd. stands as one of India's leading credit card issuers, a joint venture between the State Bank of India and The Carlyle Group. Established in 1998, the company has grown rapidly, capturing a significant share of the burgeoning Indian credit card market. With a strong emphasis on customer-centric services, SBI Cards offers a diverse range of credit products tailored to meet the needs of its varied clientele—from premium offerings for affluent customers to entry-level cards designed for first-time users. The company has strategically leveraged its parent’s expansive bank infrastructure to reach a wide base, driven by innovative digital solutions and a focus on...
SBI Cards and Payment Services Ltd. stands as one of India's leading credit card issuers, a joint venture between the State Bank of India and The Carlyle Group. Established in 1998, the company has grown rapidly, capturing a significant share of the burgeoning Indian credit card market. With a strong emphasis on customer-centric services, SBI Cards offers a diverse range of credit products tailored to meet the needs of its varied clientele—from premium offerings for affluent customers to entry-level cards designed for first-time users. The company has strategically leveraged its parent’s expansive bank infrastructure to reach a wide base, driven by innovative digital solutions and a focus on rewarding customer loyalty.
Inside this vibrant ecosystem, SBI Cards has not only prioritized growth but also stability, combining robust risk management practices with aggressive marketing strategies. Investors are keenly watching the company's journey as it adapts to the evolving financial landscape of India, characterized by rapid digitization and increasing consumer spending. With rising disposable incomes and a push towards cashless transactions, SBI Cards is uniquely positioned to capitalize on these trends. Strong financial performance, driven by a growing credit card base and a commitment to innovation, signals a compelling investment opportunity for those looking to tap into the future of consumer finance in one of the world's fastest-growing economies.
SBI Cards and Payment Services Ltd. (SBI Card) is one of the prominent players in the Indian credit card market. The core business segments of SBI Card can be broadly categorized into the following areas:
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Credit Cards:
- SBI Card issues a variety of credit cards catering to different customer segments. This includes premium cards, reward cards, cashback cards, and co-branded cards in partnership with various brands and retailers. The product offerings are designed to meet the diverse needs of consumers, from lifestyle benefits to travel perks.
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Customer Acquisition and Relationship Management:
- SBI Card focuses on acquiring new customers through various channels, including online platforms, branches, and partnerships. They employ marketing strategies that emphasize customer segmentation, personalized offers, and relationship management to enhance customer loyalty and retention.
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Payment Solutions:
- Beyond credit cards, SBI Card offers various payment solutions, including mobile wallets and online payment systems, facilitating seamless transactions for consumers. This segment aims to provide customers with flexible payment methods and improve their experience in making transactions.
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Merchant Services:
- SBI Card collaborates with merchants to provide credit card acceptance and related services. This segment includes the promotion of card acceptance infrastructure, such as point-of-sale (POS) terminals, and offers value-added services to merchants, like transaction analytics and data insights.
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Digital Initiatives and Fintech Collaborations:
- To align with the growing digital payment ecosystem, SBI Card has invested in digital initiatives and partnerships with fintech companies. This includes enhancing their digital infrastructure, offering app-based services, and integrating advanced technologies for better customer service and transaction security.
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Rewards and Loyalty Programs:
- SBI Card places significant emphasis on rewards and loyalty programs that incentivize spending through their cards. These programs are tailored to different customer preferences, aimed to enhance customer engagement and encourage higher usage of SBI credit cards.
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Fee-Based Services:
- Besides interest income from credit card outstanding balances, SBI Card generates revenue through various fee-based services, including annual fees, late payment fees, and transaction fees from merchants.
By leveraging these core business segments, SBI Card aims to build a robust market presence, enhance customer experience, and drive sustainable growth in the competitive payment services sector in India.
SBI Cards and Payment Services Ltd has several unique competitive advantages that set it apart from its rivals in the credit card and payment services industry. Here are key advantages:
1. Strong Brand Equity:
- As a subsidiary of State Bank of India (SBI), one of the largest and most trusted banks in India, SBI Cards benefits from strong brand recognition and customer trust, which can lead to a broader customer base.
2. Extensive Customer Base:
- SBI serves millions of customers through its extensive banking network. This vast customer base provides SBI Cards with a ready market for its credit card products and services.
3. Innovative Product Offerings:
- SBI Cards often tailors its products to meet specific customer needs, including co-branded cards with various partners (airlines, retailers), offering features like rewards, travel benefits, and discounts, which can attract more customers.
4. Robust Distribution Network:
- Leveraging SBI’s extensive banking network, SBI Cards has a competitive edge in terms of distribution channels, enabling easy access to various customer segments across urban and rural areas.
5. Technological Advancements:
- Investments in technology and digital platforms enhance the customer experience, streamline onboarding processes, and provide better fraud detection systems, making transactions seamless and secure.
6. Loyalty Programs:
- SBI Cards offers enticing loyalty rewards and cash back programs which appeal to a wide range of consumers, driving card usage and customer retention.
7. Strong Risk Management Framework:
- Backed by SBI’s expertise and resources in risk assessment and management, SBI Cards can maintain a healthier asset quality and manage credit risk effectively.
8. Regulatory Advantage:
- Being associated with a public sector bank can provide additional credibility in regulatory compliance and navigation, potentially leading to better partnerships and trust among stakeholders.
9. Focus on Customer Segmentation:
- SBI Cards effectively employs customer segmentation strategies to develop targeted marketing and personalized services, which enhances user engagement.
10. High Scalability Potential:
- Given the growth potential of the Indian credit card market, SBI Cards has significant opportunities to scale its operations while maintaining efficiency due to its organizational structure and backing.
11. Cross-Selling Opportunities:
- As part of SBI, there are substantial opportunities for cross-selling financial products, compared to standalone competitors, enhancing customer relationships and increasing revenue per customer.
By capitalizing on these competitive advantages, SBI Cards can strengthen its position in the market against rivals while also adopting strategies akin to those advocated by Buffett and Munger, such as focusing on sustainable business practices and long-term value creation.
SBI Cards and Payment Services Ltd. (SBI Cards) operates in a competitive and rapidly evolving landscape. Here are some of the key risks and challenges the company may face in the near future:
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Increased Competition: The credit card industry in India is witnessing growing competition from both traditional banks and fintech companies. Emerging players and innovative payment solutions can pressure market share and profit margins.
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Regulatory Challenges: Changes in regulations or compliance requirements by the Reserve Bank of India (RBI) and other regulatory bodies can impact operational practices, costs, and profitability. This could include regulations regarding data privacy, transaction fees, or lending practices.
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Economic Factors: Economic downturns can lead to increased default rates on credit card payments. A sluggish economy can also impact consumer spending, which in turn affects transaction volumes.
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Technological Disruption: The rise of digital payment solutions, mobile wallets, and BNPL (Buy Now Pay Later) services may divert customers from traditional credit card usage. Keeping up with technological advancements and consumer preferences is crucial.
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Cybersecurity Risks: As a financial services provider, SBI Cards faces the risk of cyber-attacks and data breaches. Ensuring robust cybersecurity measures and safeguarding customer information is vital.
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Customer Acquisition and Retention: Attracting and retaining customers in a crowded market is challenging. SBI Cards needs to invest in marketing, customer service, and product innovation to maintain loyalty.
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Economic Policy Changes: Changes in fiscal or monetary policy, including shifts in interest rates, can affect consumer behavior and credit risk, thereby impacting SBI Cards' lending strategy and profitability.
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Credit Risk: A significant challenge is managing credit risk, especially in a post-pandemic environment where defaults may be more likely. Effective credit assessment and monitoring processes are essential.
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Payment Infrastructure: As payment technologies evolve, the requirement for a robust technological infrastructure becomes pressing. Any failure in technology or service delivery can lead to customer dissatisfaction and loss of business.
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Market Saturation: The Indian credit card market is rapidly growing, but certain segments may become saturated. Differentiating products and services in a saturated market can be a challenge.
To navigate these risks and challenges, SBI Cards will need to adopt a proactive approach focusing on innovation, customer insights, regulatory compliance, and risk management strategies.
Revenue & Expenses Breakdown
SBI Cards and Payment Services Ltd
Balance Sheet Decomposition
SBI Cards and Payment Services Ltd
Current Assets | 34.2B |
Cash & Short-Term Investments | 1.1B |
Receivables | 7.3B |
Other Current Assets | 25.8B |
Non-Current Assets | 547.5B |
Long-Term Investments | 35.3B |
PP&E | 4.4B |
Intangibles | 1.3B |
Other Non-Current Assets | 506.6B |
Current Liabilities | 343.4B |
Accounts Payable | 15.1B |
Short-Term Debt | 267.9B |
Other Current Liabilities | 60.4B |
Non-Current Liabilities | 117.5B |
Long-Term Debt | 99.6B |
Other Non-Current Liabilities | 17.9B |
Earnings Waterfall
SBI Cards and Payment Services Ltd
Revenue
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174.2B
INR
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Cost of Revenue
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-14B
INR
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Gross Profit
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160.2B
INR
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Operating Expenses
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-105B
INR
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Operating Income
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55.2B
INR
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Other Expenses
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-31.1B
INR
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Net Income
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24.1B
INR
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Free Cash Flow Analysis
SBI Cards and Payment Services Ltd
INR | |
Free Cash Flow | INR |
In Q2 FY '25, SBI Card achieved revenue of INR 4,556 crores, an 8% increase year-over-year, but profits dropped to INR 404 crores due to rising credit costs (9%) and operational expenses tied to the festive season. Receivables surged 23% year-on-year to INR 55,601 crores. The company noted an improvement in early delinquency lines, yet gross NPAs increased to 3.27%. With a capital adequacy ratio at 22%, SBI Card is focusing on portfolio quality, believing credit costs may stabilize as economic conditions improve. Continued consumer spending and digital adoption are expected to drive growth in the upcoming quarters.
What is Earnings Call?
SBICARD Profitability Score
Profitability Due Diligence
SBI Cards and Payment Services Ltd's profitability score is 58/100. The higher the profitability score, the more profitable the company is.
Score
SBI Cards and Payment Services Ltd's profitability score is 58/100. The higher the profitability score, the more profitable the company is.
SBICARD Solvency Score
Solvency Due Diligence
SBI Cards and Payment Services Ltd's solvency score is 29/100. The higher the solvency score, the more solvent the company is.
Score
SBI Cards and Payment Services Ltd's solvency score is 29/100. The higher the solvency score, the more solvent the company is.
Wall St
Price Targets
SBICARD Price Targets Summary
SBI Cards and Payment Services Ltd
According to Wall Street analysts, the average 1-year price target for SBICARD is 712.31 INR with a low forecast of 554.49 INR and a high forecast of 1 008 INR.
Dividends
Current shareholder yield for SBICARD is .
Shareholder yield represents the total return a company provides to its shareholders, calculated as the sum of dividend yield, buyback yield, and debt paydown yield. What is shareholder yield?
Ownership
SBICARD Insider Trading
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Profile
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Description
SBI Cards & Payment Services Ltd. provides credit cards and payment solutions. The company is headquartered in Gurgaon, Haryana and currently employs 3,774 full-time employees. The company went IPO on 2020-03-16. The firm provides credit card services. The firm offers a wide range of credit cards to individual cardholders and corporate clients, which includes lifestyle, rewards, travel & fuel, shopping, banking partnership cards and corporate cards. The firm also offers payment products and services in the form of corporate and credit cards with incentive and rewards programs.
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IPO
Employees
Officers
The intrinsic value of one SBICARD stock under the Base Case scenario is 1 232.29 INR.
Compared to the current market price of 679.7 INR, SBI Cards and Payment Services Ltd is Undervalued by 45%.